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New Jersey launches legal action against oil and gas giants

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The New Jersey office of the Attorney General, alongside the Division of Consumer Affairs and the NJ Department of Environmental Protection, have filed a lawsuit against five oil and gas giants and the industry trade group of which they are members. 

  • New Jersey is suing a number of oil and gas companies for knowingly subjecting its residents to the devastating impacts of climate change. 
  • Litigation is increasingly being used as a way to hold corporations accountable for their climate failings, but the fossil fuels industry has its own legal weapons. 
  • The reputational (and financial) risk associated with corporate liability suits is causing increasing concern in the energy markets. 

The complaint names Exxon Mobil (NYSE:XOM), Shell Oil Company, Chevron (NYSE:CVX), BP (NYSE:BP), ConocoPhillips (NYSE:COP) and the American Petroleum Institute (API) as its defendants.  

It accuses them of knowingly making false claims that deceived New Jersey’s residents about the reality of climate change and the extent to which their fossil fuel products have exacerbated the climate crisis. 

According to New Jersey attorney general Matthew J. Platkin: “These companies understood decades ago that their products were causing climate change and would have devastating environmental impacts down the road. They went to great lengths to hide the truth and mislead the people of New Jersey, and the world.” 

Shawn M. LaTourette, the State’s commissioner of environmental protection, said: “Our communities and environment are continually recovering from extreme heat, furious storms, and devastating floods. These conditions will sadly only worsen in the decades ahead, leaving us scrambling to prepare for a parade of harmful climate changes.” 

“All this while we rush to ween ourselves off the very products these companies have long known would fuel our pain but deceived New Jerseyans about, because keeping us addicted was better for their bottom line. It was wrong to mislead us; wrong to undermine climate science; wrong to put profit over people and the planet that we share. It is time New Jersey demands accountability,” he concludes. 

What does the lawsuit include? 

The complaint alleges that fossils fuels companies have been aware of their contribution to climate change since the 1950s, and that they had taken these indications seriously enough to invest heavily in the protection of their own assets. They did not, however, warn either the public or State authorities about the adverse impacts of their operations. 

As such, the companies stand accused of misrepresenting, suppressing, and omitting material facts about the negative consequences of their products. The API, meanwhile, is alleged to have played a key role in orchestrating and implementing climate denial campaigns on the companies’ behalf. 

The lawsuit incorporates multiple legal standpoints, including violation of the Consumer Fraud Act as well as negligence, impairment of the public trust, trespass, and public nuisance.  

New Jersey authorities hope to hold the defendants accountable for their contribution to the impacts of climate change. Their complaint refers to rising sea levels, flooding, extreme weather and the financial cost of rebuilding damaged areas, improving climate resilience and transitioning away from fossil fuels. 

It requests that the named companies should be legally required to stop deceiving the public about the destructive environmental impacts of fossil fuels, and that they should be forced to pay civil monetary penalties and damages compensation. 

Legal action against fossil fuels is on the rise, but success will not come easily 

New Jersey’s lawsuit is one of over 20 pending complaints against the fossil fuel industry that have been filed by US cities and States. The increase in climate litigation cases has been bolstered by media investigations, attribution studies that identify the exact contribution of climate change to damages incurred, and the discovery of industry reports showing that fossil fuels companies have been aware of their impact since at least 1968. 

These cases have shifted from a focus on common law nuisance claims, which accuse companies of creating the ‘nuisance’ of climate change, to incorporate ‘failure-to-warn’ and ‘duty of care’ complaints that allow charges of fraud to be introduced alongside liability claims.

This transition could support legal action against fossil fuels companies, by providing courts with a more refined legal basis on which to make their decisions. 

The increase and refinement of climate litigation against fossil fuels companies does not, however, mean that New Jersey is in for an easy win. There are several barriers that must be overcome, such as the procedural limitations of determining which courts should hear which cases and whether individual States can hold international companies liable for their global operations. 

The fossil fuels industry has its own legal weapons 

The oil and gas industry has also found a use for litigation, primarily through a mechanism known as investor–state dispute settlement (ISDS), which allows fossil fuel companies to sue national governments for losses they incur due to public policies. 

ISDS is used more by the fossil fuels sector than any other industry, with cases granting average compensation of more than $600 million. This is despite warnings from the Intergovernmental Panel on Climate Change that ISDS cases could severely limit global efforts to transition to net zero. 

The Energy Charter Treaty (ECT), developed in the 1990s and signed by 53 countries, is the greatest contributor to  ISDS claims over the forced stranding of oil and gas assets that do not align with the 1.5°C carbon budget.

It has been used by the likes of Uniper (XETR:UN01), RWE (XETR:RWE), Rockhopper (LSE: RKH) and Ascent Resources (LSE:AST) to win lawsuits against policies designed to phase out coal power, ban offshore oil drilling in coastal areas and limit fracking. 

Times are changing for fossil fuels companies 

International oil companies would lose around $100 trillion in potential revenues if they were required to align with the 1.5 target of the Paris Climate Agreement.

Evidently, they will not go down without a fight. Despite having found their own use for litigation, however, the tide may be changing for fossil fuels companies.  

As climate lawsuits against fossil fuels companies grow stronger, there is an increasing opportunity for them to reach the ‘discovery’ phase. This stage of legal proceedings requires defendents to provide relevant information that could be made public, potentially resulting in reputational damage that could permanently weaken the position of targeted companies.

Such was the result of legal action against the tobacco industry, from which it has never recovered. 

Furthermore, the increase in legal action against corporate actors comes alongside a broader adoption of climate litigation against national governments. This could lead to the implementation of stricter policies against oil and gas, as well as the development of better methodologies to link climate damages to specific companies. 

There has also been an increasing focus on how high-emissions nations could, and should, compensate losses and damages to less responsible, less wealthy and less resilient countries.

Loss and damage has been included on the provisional agenda for COP27, while a group of more than 400 global organisations have requested its inclusion in the formal proceedings. If loss and damage compensation is successfully negotiated, governments will have an even greater incentive to impose strict legislation on fossil fuels companies. 

Whether or not the New Jersey case is successful, it is clear that climate litigation could ultimately be used as a valuable tool for holding oil and gas companies accountable for their environmental impact. The key question is whether global legal systems can be adapted in time to make a difference. 

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